3 Leadership Mandates For Sustained Innovation & Growth

Peter Drucker and Clay Christensen have repeatedly pointed to process, knowledge, and long-term vision for sustained innovation. So why are we still rushing to the finish line half-baked?

In a recent post by Alan Hall at Forbes, Harvard Business School professor Clayton Christensen is quoted:

Our current economy, however, has gone off of the rails in large part because we are focused almost entirely on efficiency innovations--on streamlining and wringing bottom line savings and additional profits out of our existing organizations.

...We are focused on the wrong metrics. Our universities are training entrepreneurs--and investors--to focus on fast and efficient return on capital investment. Efficiency innovations provide return on investment in 12-18 months. Empowering innovations take 5-10 years to yield a return.

I couldn't agree more! You cannot rise to greatness by continuously shrinking yourself!

After reading Alan's post with Christensen's thoughts, I couldn't help but expand upon the previous thoughts I shared in regard to sustained innovation, growth, and the leadership mindset.

Along with Christensen, my thinking has been deeply influenced and shaped by Peter Drucker. You cannot begin to think of innovation as a process without studying Drucker and his views on systematic innovation, entrepreneurship, organizational structure, knowledge workers (a term he coined a decade ago), and community.

The Story of The Steam Engine

In his book, Innovation & Entrepreneurship, Drucker illustrated innovation with cross-disciplinary knowledge and many representative examples. He used the development of the steam engine to make several points about it.

First, innovation is usually not the result of a mad scientist's eureka moment. James Watt, who usually gets credit for the steam engine, was preceded by Thomas Newcomen, whose invention in 1712 was used to pump water out of a coal mine. "Both men," Drucker writes, "were organized, systematic, purposeful innovators."

Second, innovations often are the result of many people approaching a challenge with different ideas and knowledge. Watt brought to Newcomen's engine the knowledge of how to ream a smooth cylinder and the design for a condenser.

Third, innovations often unfold over time. The refinements to Newcomen's work by Watt and others occurred over many decades.

The airplane, Drucker points out, could have only come about from the convergence of two types of knowledge -- the gasoline engine and the mathematics of aerodynamics. The knowledge required for innovation is not always technical. The development of the modern newspaper, for example, depended not only on the telegraph and the teletype, but also on mass literacy and mass advertising.

Identify, Design, Manage

It is one thing to wish for long-term change and innovation, but a very different story to practice sustained innovation throughout an organization. Leaders need to create a process view for how to identify growth opportunities; design and enhance future options; and manage in order to realize sustainable value. A few required steps to get you started:

1. Identify Growth Opportunities

A roadmap for Growth and Innovation should be created by establishing:

Scope: What business opportunities (i.e. Products/Services, Business Model, Process/Organization) in your organization are poised for Innovation?
Business Function: Which functional area (i.e. Product Management, Marketing, Partner Management, etc.) in your organization will benefit most from Innovation?
Outcome/Metrics: How would you define business value and implementation success?
Issues and Risks: What are your organizational, business, and technology challenges?

2. Design and Enhance Future Options

Options/Scenarios with interconnected 3600 operating blueprints should be created and modified regularly with continuous dependency analysis that include:

Discoveries about the unmet needs of current and future markets and customers.
Clear insight into interdependencies between strategy, business models, operations, processes, organization, and technology.
Create cross-functional, cross-disciplinary, transparent long-term business cases and launch plans for new initiatives.

3. Manage in Order to Realize Sustainable Value

Ensure realization of value creation and preservation through ongoing performance analysis that includes:

Strategic investment management: long-term business value vs. short-term risk.
Define, manage, and track financial metrics and strategic execution.
Create analytics to forecast potential changes or adjustments of ongoing and future initiatives.
Establish collaborative visibility, control and prioritization of investment decisions.

Sources of Innovation

"Systematic innovation therefore consists in the purposeful and organized search for changes, and in the systematic analysis of the opportunities such as changes might offer for economic or social innovation." -- Peter Drucker

Drucker outlines seven sources for innovation that should be monitored by those interested in long-term success:

The Unexpected -- the unexpected success, the unexpected failure, the unexpected outside event;
The Incongruity-- between reality as it actually is and reality as it is assumed to be, or as it "ought to be;"
Innovation based on a process need;
Changes in industry or market structure that catch everyone unaware;

  • Demographics (population changes);
  • Changes in perception, mood and meaning;
  • New knowledge,[/b] both scientific and nonscientific.

He goes on to explain each of these seven sources in great detail with practical examples. In particular, he outlines "New Knowledge" or knowledge-based innovation:

"Knowledge-based innovation is the "super-star" of entrepreneurship. And like most super-stars, knowledge-based innovation is temperamental, capricious, and hard to manage. Not to mention it has the longest lead-time of all innovations. One other key characteristic of knowledge-based innovations--and a truly unique one--is that they are almost never based on one factor but on the convergence of different kinds of knowledge, not all of them scientific and technological."

Drucker spoke of knowledge-based innovation in 1985. He identified the convergence of different disciplines and points of view as the petri dish for innovation. What he didn't discuss then--simply because it was still too early--was the huge role that the management of technology would play in innovation today.

Since his time, technology has of course permeated our organizations to a point that we know it has become indispensable. That will never change. And there is no doubt a long-term view and repeatable processes will remain requirements for sustained innovation and long-term growth.

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[Image: Flickr user El Ray]

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